Safaricom profits drop by Sh7b on Ethiopia entry and inflation

Safaricom Chairman Board of Directors John Ngumi, CEO Peter Ndegwa and Chief financial officer Dilip Pal during half-year financial results. [Wilberforce Okwiri, Standard]

Safaricom has reported an 18 per cent drop in net profit for the half year to September attributed to set-up costs of its Ethiopian subsidiary, inflation and the recent general election that slowed down consumer spending.

This saw the leading telco's profit after tax for the 2023 half-year stand at Sh Sh30 billion compared to Sh37 billion recorded over a similar period last year.

Total revenue for the period under review stood at Sh153 billion, a 4.8 per cent increase from Sh146 billion reported in a similar period last year.

"Our revenue numbers have been adversely impacted by inflationary pressure on consumer spending, a slowdown in business operations in the period leading to, during and after the election, increase in excise duty on SIM cards and mobile phones and mobile termination rate changes that came into effect from 1st August impacting our interconnect revenues," said Safaricom Chief Finance Officer Dilip Pal.

The firm spent Sh5.9 billion on Ethiopia operating costs in the period under review, the bulk (Sh3 billion) of which went to staffing costs with another Sh1.6 billion spent on network operating costs.

Safaricom Ethiopia counts 740,000 subscribers on its network which includes 561 2G, 3G and 4G sites and two data centres.

As at 31st October this year, the Ethiopian subsidiary comprised a total workforce of 655 employees, 66 distributor shops and 2,000 outlets selling SIM cards.

"We are pleased with the commercial progress made in Ethiopia since the launch of operations early last month. Most importantly we are enthusiastic about the growth opportunity in Ethiopia, with over 740,000 customers so far and 20,000 new customers joining the network daily," said Safaricom chief executive Peter Ndegwa.

"We are also encouraged by data and voice usage levels with 711 MBs average usage per active data customers and 30 Minutes of Use per active voice customers for the month of October," he said.

The company expects to invest up to Sh57 billion in Ethiopia in the coming year with the subsidiary expected to report up to Sh25 billion in operating losses over the same period of time. Revenue from voice in the review period stood at Sh39.8 billion, a 3.8 per cent drop compared to Sh42 billion reported last year while M-Pesa revenue went up 8.7 per cent to Sh56.8 billion.

Ndegwa said the company was in the final stages of launching several products within the M-Pesa ecosystem in a bid to add value to consumers and boost revenue from the Super App.

These include a junior version of M-Pesa targeted at minors below the age of 18 and a long-awaited mobile investment product dubbed Mali that will be available from the end of this month.

Safaricom first revealed in 2019 that it was working on a USSD investment-led application that will allow retail investors to save and invest in securities on the Nairobi bourse from their mobile phones.

The telco further reported an 11 per cent increase in mobile data revenue from Sh23.6 billion in the first half of the last financial year to Sh26.2 billion.

Loans disbursed through Fuliza rose 30 per cent from Sh242 billion disbursed in the first half of the last financial year to Sh315 billion in the period under review with the telco earning Sh3.4 billion in revenue from the over-draft facility.

The firm counts 7.4 million distinct customers on Fuliza with the average ticket size falling from Sh375 last year to Sh320 while the repayment versus disbursal rate also fell from 99 per cent to 96 per cent over the same period of time.

KCB M-Pesa on the other had reported Sh21.7 billion in disbursements in the period under review, a 5 per cent drop from Sh22.9 billion last year while the average loan taken from the lending platform fell 44 per cent from Sh9,070 last year to Sh5,033 in the first half of the current financial year.